Advisers have urged Chancellor Philip Hammond to scrap the lifetime allowance and break the link between pensions and Isas ahead of the Budget statement next week.
Firms say the biggest opportunity for reform would be to do away with the lifetime allowance, which over recent years has been cut from £1.5m to £1m.
Signpost Financial Planning director Nigel McTear says: “Abolishing the lifetime allowance would help instill a bit of confidence in wealth management clients. It’s a ridiculous tax that penalises investment success and is just another reason people turn away from pensions.”
McTear says the lifetime allowance works against the major issue of people not saving enough for retirement.
He says: “The lifetime allowance was brought in at a time when the country was in crisis. The country is now not in crisis, yet that measure persists. They’ve kind of created a monster.
“Of course the original intention was for the lifetime allowance to be at £2.4m by now if it had gone up with indexation, but the opposite has happened.”
He adds: “It’s been a political football. George Osborne’s talk of £1m in his manifesto had nothing to do with fairness or what would encourage good behaviour.”
McTear would also like to see the recently announced cuts to the money purchase annual allowance reversed, saying the move is “a sledgehammer to crack a nut.”
In the Autumn Statement last year, Hammond announced the MPAA would fall from £10,000 to £4,000 from April.
LEBC public policy director Kay Ingram agrees.
She says: “We’re very opposed to the MPAA reduction and the impact it will have. We don’t recognise the idea of all these wealthy people recycling tax-free cash. I wouldn’t recommend that to anybody.
“The Government suggests the move will save them £70m. I don’t know how they came to that number.”
Ingram argues the MPAA will hit both average earners looking to wind down to part-time work, but also those who wish to cash in some of their pension to pay for care of elderly relatives.
She adds: “If they go back to work and then can’t then fund their pension that seems very unfair.”
Verve Investment Planning IFA Steve Buttercase believes the Chancellor will be nervous about the impact of Brexit, and will look to introduce measures to help the so-called “Jams”, or those “just about managing”.
He says this may involve increasing the personal allowance, as well as reducing the annual allowance to show the wealthy are being targeted.
Buttercase says his hope is for a greater distinction to be made between pension and Isa saving.
He says: “I’d want any form of pension simplification, if possible, and an abandonment of the link between pensions and Isa options.
“I don’t want to see them merged, which is what we were heading for with Osborne. It benefits the already financially astute, not those who aren’t.”